FORESCOM Lessons Learned in Central America 31 January – 2 February 2012. Carlos Natareno Country...
-
Upload
cory-hubbard -
Category
Documents
-
view
212 -
download
0
Transcript of FORESCOM Lessons Learned in Central America 31 January – 2 February 2012. Carlos Natareno Country...
FORESCOM
Lessons Learned in Central America
31 January – 2 February 2012.
Carlos Natareno
Country Manager
Guatemala
Mayan Biosphere Reserve
• In 1990, Guatemalan Government established the Maya Biosphere
Reserve (MBR) in Petén. It was created with the purpose of
protecting natural resources from harmful agricultural practices
illegal logging, such as “slash-and-burn”, illegal logging (mahogany)
and intensive farming/livestock.
• The MBR covers 2,113,000 ha and is divided into three zones with
different functions: core zone, multiple use zone and buffer zone.
FORESCOM
Between 1998 and 2002, thirteen concessions were granted to eleven
community organizations and two private enterprises.
Thus, FORESCOM was created to support the communities and
cooperatives in managing their forests concessions and market their
products.
Main activities of FORESCOM: FSC certifications, technical
assistance, “add value” to timber products (drying and moulding)
and market access services.
FORESCOM
FORESCOM has a cooperative structure and its members are the
communities that hold concession rights. Name of shareholder community Abbreviation Concession
size (ha)
Asociación Forestal Integral Cruce a la Colorada AFICC
20,469
Asociación Forestal Integral San Andrés Petén AFISAP 51,940 Cooperativa Carmelita R. L. CARMELITA 53,797 Sociedad Civil Laborantes del Bosque LABORANTES 19,386 Sociedad Civil Organización, Manejo y Conservación / Uaxactún OMYC 83,558
Sociedad Civil Árbol Verde ARBOL VERDE 64,974 Sociedad Civil Custodios de la Selva CUSTOSEL 21,176 Cooperativa Unión Maya Itzá R. L. UMI 5,924 Cooperativa Técnica Agropecuaria R. L. TECNICA 4,607 Asociación Forestal Integral La Colorada AFIC 22,067 Asociación de Productores Agroforestales de San Miguel APROSAM 7,039
TOTAL 354,937
Loan from Oikocredit…
Oikocredit approved a USD 300,000 loan, 5 year term, on August 10 2006. Due
to management changes the disbursements were postponed until 2007, and
reoriented to the acquisition of machinery, construction of kilns, construction
of storage facility and working capital. These new fund destinations were
essential to the implementation of a business plan developed in part by RA.
Forescom was able to comply with its first interest payment in March 2008
(USD 10,862) and its first capital payment in September 2008 (USD 52,582
including interests). Existing guarantees include a mortgage on Forescom’s
main production facility and a guarantee from ICCO (70% of financial
exposure).
History
General Manager was replaced shortly after the approval of the
Oikocredit loan, by an interim representative from RA during the first
semester of 2007.
Huge pressure by cooperating agencies to achieve sustainability:
USAID, ICCO, Oikocredit, Rainforest Alliance, IUCN, ACOFOP and.
Agexport.
The management team and board of Forescom lacked of a “business”
approach.
Inability to Meet Financial Obligations.
Several changes on the General Management position. Lack of
management generated inadequate strategic decisions: Forescom
became a trader instead of a service provider.
The “new business model” demanded huge quantities of working
capital and a fast cash conversion cycle to pay on time to the
communities.
Increasing liquidity gap.
Adjustments to the loan from Oikocredit
Oikocredit approved a CB to develop the strategic and operative plans
(2008).
A rescheduling of the loan, in order to reduce the pressure over liquidity
position. The payment schedule was changed, from 6 month
payment to quarterly payments (2009).
After a 2 year intervention, the consultants were fired because of lack
of results (2010).
More Problems Emerge
There was a make up on the financial statements by the Financial
Manager. All the data from 2007, 2008 and 2009 was not real.
In a period of 3 years, 3 General Managers resigned from the position.
More debt was acquired with energy providers (gasoline and
electricity), suppliers (shareholders) and transportation companies.
New Solution
Forescom reached “technical bankruptcy”: no equity, huge debts and
no internal control.
In March 2010, a new general manager was hired (Mario Reynoso):
• Review and adjustment of financial statements
• Reduction of staff.
• New business model: service provider.
• Reduce liabilities.
• Rebuilt trust and business relationships.
• Mitigate pressure from RA.
• Improve quality of operations.
New Solution
Oikocredit approved a new rescheduling of the loan: monthly payments
during the last for months of the year.
A CB (technical assistance) was approved, in order to assure the
continuity of the management team (RA, Oikocredit, Heidehof and
Acofop). The CB support was conditioned: good performance and
sale of unused assets.
Current Status of the Loan
Outstanding: USD 115,827
Installments in 2011: USD 126,856
Interest Payments in 2011: USD 32,647
Penalties paid in 2011: USD 8,379
The Main Causes
FORESCOM was created as an initiative of the cooperating agencies
(RA), as a respond of a market opportunity for timber products.
The enterprise was designed by the cooperating agencies, and not by
the communities. This triggered and evidenced several weaknesses
in terms of governability, internal control, accounting and
management.
Lack of commitment and know how in management and
entrepreneurial skills.
The Main Causes
Mission Drift: the original idea was to create a service provider
enterprise, not a commercial intermediary.
Weak monitoring from Oikocredit, resulted in inaccurate measures to
mitigate credit risk (first CB and rescheduling).
To much intervention by RA, which affected the governability and
decision making oriented to sustainability
Follow up & lessons learned
• Close monitoring and constant communication with General
Manager.
• Promote the continuity of current management team.
• Include the securities into a guarantee trust fund.
• Constant communication with RA and Acofop, in order to promote
the autonomy of Forescom.
• New rescheduling of the loan in 2012, given the excellent credit
history of Forescom during 2011.
• Coordination with Agexport for commercialization strategy and
market access.
Thank you for your attention
Q&A